A week after New Delhi-based Hindustan Powerprojects encashed bank guarantees of Lanco Infratech worth ₹500 crore, due to unfulfilled contractual obligations at the latter’s 2,520MW Anuppur thermal power plant, the sub-contractors of Lanco have alleged the company is trying to “collect money from the market” by encashing bank guarantees of various sub-contractors across the country.

Several companies, including Kelvion India, Pertair Valves and Controls, Vaas Automation and others have received notification that their bank guarantees have been encashed by Lanco. While the amounts of these bank guarantees as well as dates of orders against which they had been issued vary significantly, the date of the invocation letters sent by Lanco to the banks (copies seen by BusinessLine ) is the same — June, 23.

This comes just a few days after the RBI directed IDBI Bank and other lenders of Lanco to initiate corporate insolvency proceedings against the company under the Insolvency and Bankruptcy Code. The company was among 12 stressed accounts identified by the RBI.

According to Hemant Chawla, General Manager - Business Development, Kelvion India, as soon as corporate insolvency proceedings against Lanco started, Lanco started encashing bank guarantees of sub-contractors, which is “easy money” for them. Kelvion India and other companies are likely to go legal against Lanco.

When contacted, a Lanco spokesperson said the suppliers, mentioned above, were sub-contracted for the solar manufacturing project for which the firm acted as an EPC contractor. He added that large amounts were given as advances to these sub-suppliers, but progress had been lacking for the past 10 months. The total amount of bank guarantees encashed for these suppliers is ₹3.43 crore, he said.

He added that Lanco recently encashed sub-suppliers’ bank guarantees worth ₹15.82 crore where advances already given to the sub-suppliers had been outstanding for periods as high as 18 months. Around 80 per cent of these bank guarantees pertained to a sub-supplier for Lanco’s Anpara project completed in 2011, where the sub-supplier has failed to reimburse the amount Lanco spent on its behalf, the spokesperson said.

On July 3, Lanco Executive Chairman L Madhusudhan Rao wrote to nine banks urging them not to honour the encashment of bank guarantees worth ₹500 crore by Hindustan Power (all of the guarantees were issued with respect to the EPC contract for the Anuppur power project).

In the letter (seen by BusinessLine ), Rao alleged that Hindustan Power submitted bank guarantees with the “intent of securing funds to mitigate its own financial difficulties not related to these contract agreements while taking advantage of situation wherein Lanco Infratech is being referred to NCLT (National Company Law Tribunal).”

Lanco had earlier approached the Delhi High Court for an injunction against Hindustan Power from encashing the bank guarantee, which the court had rejected on July 1. Majority of the banks have followed the directive of the court and revoked the bank guarantees. “Considering the unfulfilled contractual obligations, Hindustan Power exercised the legal remedial action that is available to the company as part of its contract,” a Hindustan Power spokesperson told BusinessLine . “With a view to safeguard the interests of our stakeholders and the operations of the thermal asset, the company had to encash the bank guarantees”.

He added that Hindustan Power has multiple claims against Lanco, including large cash advances and unfinished work at the thermal site.

Insolvency

Ealier this month, lenders of Lanco said they will admit the company to NCLT for insolvency and bankruptcy proceedings. The case is expected to be sent for admission in the next 2-3 weeks.

Lanco group’s debt exceeds ₹44,000 crore. In 2015, Lanco revealed plans to seal its power assets, of an enterprise value of about ₹25,000 crore, in 2018, hoping to bring down the debt by ₹18,000 crore. However, it could only sell 1,200MW imported coal-based thermal power project in Udupi district of Karnataka to Adani Power for an enterprise value of ₹6,300 crore in the same year.

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